China's commerce ministry responds to US investigation and sanctions threats over AI model 'distillation', asserting domestic development legitimacy and warning of countermeasures

A Commerce Ministry spokesperson responded to recent US statements threatening investigations and sanctions against Chinese AI companies for allegedly "distilling" US frontier models and stealing intellectual property.

"We have noted the relevant situation," the spokesperson said. "China has consistently opposed the US politicizing and instrumentalizing science, technology, trade and economic matters, denigrating Chinese companies with various unfounded pretexts and imposing sanctions. The US ignores the fact that Chinese enterprises' AI models were released at times very close to US frontier models, and that certain Chinese models' capabilities have already reached leading levels. The US has pinned labels on Chinese companies for allegedly relying on 'distillation' and 'theft of US intellectual property,' while threatening to suppress and sanction them. These practices lack factual basis, have no legal foundation, employ double standards in practice, and represent typical AI hegemonic behavior."

The spokesperson urged the US to "listen to objective and rational voices from business communities in both countries, correct its hegemonic thinking, and cease denigrating and threatening sanctions against Chinese companies." China will "take all necessary measures to firmly safeguard its legitimate rights and interests" against any actions substantially damaging Chinese interests.

"We hope the US will earnestly implement the consensus reached by the two countries' leaders, move toward China, strengthen dialogue and communication on artificial intelligence, and jointly promote AI development in positive directions, advancing and improving AI governance to benefit both countries and the world."

**Separately, HSBC Holdings announced on July 27 that it will establish a global AI center of excellence in Singapore in the second half of 2026, aimed at developing scalable AI capabilities for the group's global network. The company plans to recruit over 100 AI experts. Initially, the center will focus on enhancing customer wealth management experiences, introducing intelligent treasury solutions, and developing AI-enabled digital payments.**